[Question] CC used as a labour company

[ians]

A question, I have a cc which is not being used at present for anything but there is a cheque account.

What i want to do is use the cheque account for wages payments ( because i pay a service fee every month for nothing), i would like to transfer my wages into this account and make sure ther eis 2 months wages available at any time and at the end of the year use it to pay leave pay and bonuses.

Can i use turn the cc into like a labour broker company?

[Dave A]

Can i use turn the cc into like a labour broker company?

You certainly wouldn't be the first to do that. You'd have to look at the CIPC registered scope of activities for the cc though.

[Justloadit]

It may appear that the specific company has an income, so SARS may wish to get some of it as so called profit.
If you use it for labour broking, it will also require to be registered for UIF, PAYE etc

[ians]

I have puta little thought into this and taken the replies into consideration.

The CC is registered as an electrical contracting company, which would mean that i could employ labour. I have also taken into consideration that i am paying every month for the cheque account so why not make use of it instead of just paying the monthly service fee for nothing. So my plan is to register my staff in the cc which is not vat registered and you cant claim for labour, so it makes sense. Pay all the relevant requirements, uif, PAYE, bargaing council, etc. One bonus is that if i have staff issues i close the cc and fire the lot and just keep trading as a sole prop without labour as i have done in the past. In fact i plan on getting a salary from the CC and i can register with workmans comp, in case i get njured on site, which i cant do as a sole prop.

Please feel free to advise if i am doing something wrong or i cant do what i would like to.

[Justloadit]

Being a C.C. has some disadvantages, one is that you may not trade in an insolvent state, and secondly as far as closing the company and firing the staff will still leave you open to being sued in a personal capacity. I stand to be corrected here, but in this case they may lay a claim at you directly as a member of the C.C. The interesting part is that the employees do not need funds to do this, they simply approach the CCMA, and the complete process continues from there all the way to labour court.

It may be better to change the company to a PTY

[Dave A]

That sounds like a fair plan, Ian.

as far as closing the company and firing the staff will still leave you open to being sued in a personal capacity.

I'd suggest it's more like "may still leave you open" . And I'm not sure being a Pty Ltd changes that risk much in a closely held company where all shareholders are directors.

I've got a feeling the new "rescue plan" step is going to become just another procedural hurdle in the end though. It's a bit like when the LRA first came out - the word on the street was "you can't fire people." Then it became "it's difficult to fire people." Now it's no big deal as long as you follow procedure.

[CLIVE-TRIANGLE]

Dave I concur. The issues that determine any personal liability are intrinsically the same for companies and cc's.

Interestingly, as matters stand with Ian, he is personally liable already. If I were you Ian I would certainly carry out the plan. It also affords the opportunity to spread profit if this is necessary.